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Fraud activity report does not show complete picture

Experts say to be skeptical of newly-released data that suggests mortgage fraud activity in Minnesota is on the rise.

The website MortgageDaily.com's second quarter 2011 Mortgage Fraud Index shows that mortgage activity in Minnesota was 15 percent higher than during the same period last year, and that the state's index was at its "highest level during any quarter based on more than five years of data." A press release says "Minnesota has emerged as a problem area for mortgage fraud and helped lift national activity from the first quarter."

However, the index doesn't track the number of individual mortgage fraud cases. It counts filings and other case activity. Mortgage fraud cases could get counted multiple times in their index, said a spokesman from MortgageDaily.com.

"This means that if a defendant is indicted in Q1, we will track that activity," Holly Himelright wrote in an email. "If the same defendant enters a plea, goes on trial, is acquitted, or any other substantial documented activity comes up in the next quarter, we track that as well."

Himelright concludes that the index is "reflective of mortgage fraud case activity, not necessarily mortgage fraud cases." That means it does not tell you about the volume of mortgage fraud cases that arose in a given period.

Foreclosure expert Prentiss Cox at the University of Minnesota also points out that the data could just "reflect the fact that the regulators and prosecutors are more attuned to the problem and bringing cases."

Jeanne Cooney, a spokeswoman at the United States Attorney's Office in the District of Minnesota said prosecuting mortgage fraud has become a greater priority for the Department of Justice under Attorney General Eric Holder. The Minnesota office has ramped up prosecution for such cases, she said.

"Our white collar group is working gangbusters this year," Cooney said. "The number of cases they have initiated this year — we're on pace to double what we did last year. And a chunk of that is mortgage fraud."

Many of those fraud cases are complex lawsuits dealing with conduct that happened a few years ago. That's another indication that a spike in Minnesota's index now does not necessarily reflect current mortgage fraud.

If anything, incidence of mortgage fraud appears to be dropping, according to Chuck Laszewski, spokesman for the Hennepin County Attorney's Office. "We used to be high, but have been consistently sliding in the rankings," he said in an email.

The University of Minnesota's Prentiss Cox said the data is incomplete because it does not include lawsuits brought by lenders. He is unaware of any data sets that do catalogue mortgage fraud in a thorough enough manner, he said.